Russian stocks, rouble weaken after rally

Tuesday, 2 Oct 2012 | 5:45 AM ET

SHARES

MOSCOW, Oct 2 (Reuters) - Russian shares fell on Tuesday after a rally the day before, led by the heavyweight energy sector, and the rouble edged lower, showing little reaction to comments by the central bank on inflation concerns ahead of a policy meeting.

By 0937 GMT the rouble eased 0.13 percent to 31.09 against the dollar

. Versus the euro, the rouble shed 0.3 percent to 40.16

. It weakened 0.2 percent to 35.17 versus the euro-dollar basket

.

The first deputy chairman of Russia's central bank, Alexei Ulyukayev, said on Tuesday he expected the rouble to remain stable and considered the risks of inflation to be greater than those of an economic slowdown.

"With oil prices Urals in the range of $110-115 per barrel, we see fundamental factors to be supportive for rouble stability. However, rouble exchange rate volatility is likely to remain high, and interday and interweek fluctuations of the rouble may exceed 50-80 kopecks," Julia Tsepliaeva, the chief economist at BNP Paribas, said in note.

The rouble was trading in the middle of the central bank's target range against a dollar-euro currency basket, in which the regulator does not intervene.ï¿½

The central bank will meet to discuss rates on Friday, Oct. 5. Economists, polled by Reuters last Friday, expected no change in rates in October, while the Russian economy is losing momentum, although they expected rates and inflation to rise before the end of the year.

The Russian currency is following emerging market peers such as the forint and the zloty

as investors are cautious over the timing of a likely aid request by Spain and its effect on the euro zone crisis.

The dollar-based RTS stock index

fell 0.3 percent to 1,509.07 points, and the rouble-traded MICEX was down 0.2 percent at 1,487.05 points by 0937 GMT after it had gained 2 percent on Monday.

The energy sector was among the top losers, with Gazprom

down 1 percent, after Monday's gains pushed shares to levels that encouraged some investors to take profits.

But analysts at Uralsib expected shares to continue rising over the medium term.

"The rally (on Monday) has been fairly broad across sectors, with Russian equities finding more favor with global investors, as recent fund flows indicate. We expect this momentum to provide more tailwind for Russian stocks in the medium term, ensuring outperformance," Uralsib wrote in a research note.